What’s become of the United States when a 70-year-old grandmother has to become
a drug smuggler just to stay alive?

In the richest nation of the world, the United States of America, people are
facing a dire reality. They must often choose between basic necessities such
as food, shelter and needed medications. The skyrocketing cost of
prescription drugs has caused some people to resort to drug smuggling to
survive.

Although the United States is the world’s largest market for pharmaceuticals,
Americans pay the world’s highest prices.1 Effectively, a two-tier price system
exists for the same drugs manufactured by the same companies–Americans pay more
for drugs while the citizens of other countries pay less.2

Many of the same drugs sold in the U.S. are available next-door in Canada and in
Europe at half-price or less.3 However, the U.S. government has made it illegal
for Americans to get these more affordable drugs.

Under U.S. law, it is illegal and criminal for a person to import prescription
medications into the U.S.4 As a result, Americans who purchase prescription
drugs from other countries, such as Canada, are transformed into drug smugglers.
For many Americans, however, taking advantage of the global marketplace is the
only way to afford needed medications. From the young to the elderly, insured
and uninsured, millions of Americans are purchasing prescription drugs from
Canada and other countries. Through internet orders, mail orders or by
personally purchasing the drugs and crossing the border by foot, Americans are
smuggling to survive. Each day, thousands of packages containing prescription
drugs are illegally smuggled into the U.S.5 This amounts to about 10 million
packages of prescription drugs smuggled into the U.S. each year.6 Approximately
4.8 million of these packages are from Canada.7

Canada and European countries, such as the United Kingdom and France, are able
to provide drugs at substantial savings because these countries negotiate rates
on behalf of all patients.8 With the exception of a few U.S. government
programs9, attempts to implement a similar approach in the U.S., to negotiate
better prices for all Americans, have thus far been blocked by the drug
industry.

For example, the Medicare Program, which is a U.S. government run program,
provides health care coverage for over 41 million, mostly elderly, Americans.10
In representing over 41 million people, one would think that the U.S. government
would use its bulk purchasing power to negotiate lower drug prices. Basic
business sense and capitalistic principles dictate that bulk purchases,
particularly of a magnitude as large as for 41 million people, allow for the
negotiation of a better price, i.e., a volume discount. However, a 2001
government report prepared for the U.S. Department of Health and Human Services
acknowledged that “Medicare simply pays too much for prescription drugs,” over
twice the prices that it should pay, and that Medicare’s “reimbursement method
... cheats taxpayers.”11 Instead of attempting to fix this glaring problem,
Congress did quite the opposite. In 2003, Congress changed the Medicare laws to
specifically forbid the U.S. government from negotiating lower prices for
Medicare members.12 With the ability of the government to negotiate lower prices
blocked, overpriced drugs remain the norm resulting in higher bills for
taxpayers and larger out-of-pocket deductible costs to Medicare members.

A report released by Public Citizen13 found that “the drug industry hired 824
individual lobbyists in 2003–an all-time high. That’s more than eight lobbyists
for each member of the U.S. Senate.”14 According to the report, the drug industry
spent a record $108.6 million on lobbying in 2003.15

Although the drug industry blames the high price of prescription drugs on
research and development costs, financial reports filed by the drug companies
with the Securities and Exchange Commission show that, on average, the drug
industry spends over two times more on marketing, advertising and administration
than it does on research and development.16 The drug industry consistently
ranked as the most profitable industry in the U.S. every year from 1994 through
2002.17 During each of these years, the drug industry reaped profits that were
300% to 560% as profitable as the median for all Fortune 500 companies.18 A report
on drug industry profits found that in 2002, the profits of the 10 drug
companies in the Fortune 500 ($35.9 billion) were more than the combined profits
of all of the other 490 Fortune 500 companies ($33.7 billion).19

While drug companies rake in profits, the ever escalating cost of prescription
drugs continues to compromise the well being of U.S. citizens as well as U.S.
businesses that provide health care coverage to their employees. U.S.
prescription drug costs have increased by double-digit rates every year for the
past nine years.20 U.S. employers straddled with increasing prescription drug and
health care costs are either cutting back on the coverage they make available to
their employees or passing on some of the cost increases to their employees in
the form of higher premiums, deductibles or co-pays.21 Insured or not, American
consumers are facing ever-increasing out-of-pocket costs for their needed
medications.22 Even seniors with drug coverage find the cost of prescription drugs
often far exceeds their coverage limits and must choose between food, rent, and
needed medications.23 As a result, one in five adults cannot afford to buy some or
all of his or her prescribed medicines.24

Unless something is done to reign in the cost of drugs, the situation is poised
to get worse. It is projected that prescription drug spending will continue to
increase by double-digit rates each year through at least 2013.25

Immediate relief is available. The U.S. government can and should allow
Americans to legally purchase prescription drugs from Canada and other countries.26
This would allow Americans to get the same drugs they need at a substantial
savings27 and put pressure on the drug industry from charging Americans more for
prescription drugs than they charge the citizens of other countries.28

2. See for example, Susan Dentzer, “Importing Drugs,”
PBS Online News Hour with Jim Lehrer, March 9, 2004, tracking Lipitor (a top
selling drug to lower cholesterol) from its manufacture in Pfizer’s Puerto Rico
plant to the store shelves in the U.S. and Canada where the drug is sold at
substantially different prices [“The only difference between the Lipitor bound
for the U.S. and that bound elsewhere is the packaging”] (available at
http://www.pbs.org/newshour/bb/health/jan-june04/import_03-09.htm).

3. Health and Human Services Task Force On Drug
Importation, U.S. Department of Health and Human Services, “Report on
Prescription Drug Importation,” December 2004, at pp. 70-71 and Figure 7.2
(available at http://www.hhs.gov/importtaskforce/Report1220.pdf).

4. See U.S. Food and Drug Administration, letter
(and statutes cited therein) dated February 12, 2003 from William K. Hubbard,
Associate Commissioner for Policy and Planning, to Robert P. Lombardi, Esq.,
The Kullman Firm (available at http://www.fda.gov/ora/import/kullman.pdf).

5. Statement of William K. Hubbard, Associate
Commissioner for Policy and Planning, U.S. Food and Drug Administration, before
the Committee on the Judiciary of the United States Senate, July 14, 2004
(available at http://www.fda.gov/ola/2004/importeddrugs0714.html).

6. Health and Human Services Task Force On Drug
Importation, U.S. Department of Health and Human Services, “Report on
Prescription Drug Importation,” December 2004, at pp. 11-12 (available at
http://www.hhs.gov/importtaskforce/Report1220.pdf).

7. Ibid.

8. Peter Lamy Center for Drug Therapy and Aging,
University of Maryland School of Pharmacy, “Issues in Prescription Drug
Coverage, Pricing, Utilization, and Spending: What We Know and Need to Know,”
Report prepared for the U.S. Department of Health and Human Services, Office of
the Assistant Secretary for Policy and Evaluation, Office of Health Policy,
February 18, 2000, Appendix A at pp. 163-169 (available at
http://aspe.hhs.gov/health/reports/drugstudy/appena.PDF).

9. One such program, for example, is administered
by the U.S. Department of Veterans Affairs (“VA”) which provides health care
benefits to U.S. military veterans. See William M. Welch, “VA Offers Medicines
at Bargain Prices,” USA Today, June 17, 2003, which provides an overview of the
VA program and examples of lower prescription drug prices obtained through the
program (available at
http://www.usatoday.com/news/washington/2003-06-17-vets-drugs-cover_x.htm); see
also companion chart entitled “Comparing Prices: VA Dusts Competition in Drug
Prices,” June 18, 2003 (available at
http://www.usatoday.com/news/2003-06-18-va-drugs-chart.htm).

11. Office of the Inspector General, Department of
Health and Human Services, “Medicare Reimbursement of Prescription Drugs,”
January 2001, at pp. 6, 10 (available at
http://www.oig.hhs.gov/oei/reports/oei-03-00-00310.pdf).

12. Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (Public Law 108-173); see the “Noninterference”
provision of the law which is codified at 42 U.S.C. § 1395w-111 (i).

13. “Public Citizen is a national, nonprofit
consumer advocacy organization founded in 1971 to represent consumer interests
in Congress, the executive branch and the courts” (see
http://www.citizen.org/about/).

14. Public Citizen Congress Watch, “The Medicare
Drug War: An Army of Nearly 1,000 Lobbyists Pushes a Medicare Law that Puts Drug
Company and HMO Profits Ahead of Patients and Taxpayers,” June 2004, at p. 4
(available at
http://www.citizen.org/documents/Medicare_Drug_War%20_Report_2004.pdf).

26. Several bills have been introduced in Congress
which, if passed into law, would allow Americans to legally import prescription
medications. See Pharmaceutical Market Access Act of 2005, introduced in the
House as H.R. 328 and in the Senate as S. 109, 109th Cong., 1st Sess., 2005; and
Pharmaceutical Market Access and Drug Safety Act of 2005, introduced in the
House as H.R. 700 and in the Senate as S. 334, 109th Cong., 1st Sess., 2005.

27. It is estimated that allowing open
pharmaceutical markets could save American consumers at least $38,000,000,000
each year. Pharmaceutical Market Access and Drug Safety Act of 2005, introduced
in the House as H.R. 700 and in the Senate as S. 334, 109th Cong., 1st Sess.,
2005; Peter Rost, “Contradicting Itself on Drug Imports,” The New Jersey
Star-Ledger, January 5, 2005.

28. Other measures are also available. For example,
prescription drug buying pools can be established by States that would allow
anyone–from state and local governments, businesses and individuals–to join and
use their combined buying power to negotiate lower prices for prescription drugs.